Our microcap company investment strategy was built on the research of Rolf Banz, a University of Chicago doctoral student who discovered the first crack in the foundation of the efficient market theory, dubbed "the small firm effect" (Journal of Financial Economics, vol.
9(1), pages 3-18, March, 1981).

In a 1981 paper published in The Journal of Financial Economics [3], University of Chicago professor Rolf Banz showed that there is a higher potential return for investing in smaller companies as a class versus investing in the market at-large.

Part of the cause for the underweighting can be traced to research published by Rolf Banz, a University of Chicago researcher.
Studying market returns from 1931 through 1974, Banz found that small stocks outperformed large and mid-cap stocks by wide margins.
Startled by the findings, institutions began giving new weight to small stocks.
Mutual fund companies rolled out a raft of new small-cap funds.

But even before Banz published his findings, the so-called small-cap effect began to disappear, and mid caps moved into the lead.

In a 1981 paper published in The Journal of Financial Economics [3], University of Chicago professor Rolf Banz showed that there is a higher potential return for investing in smaller companies as a class versus investing in the market at-large.